Kirk took his time—watching for several minutes at each table—before moving on. He seemed to study not only how the dice were rolling but also who was in each crowd and how they were betting. After nearly thirty minutes, he went back to Table Three, its green felt playing field surrounded by the most boisterous crowd. The shooter was a woman “rolling numbers like crazy,” Perenchio noticed. Everyone was yelling, the excitement building. This was where Kirk chose to stage his own dramatic moment.
With a nod to his entourage, Kirk signaled he was ready. The casino manager stepped in to whisper to the croupier and pit boss that Kirk’s special little orange disk was a million-dollar chip. Perenchio stood there transfixed, simply amazed to be watching his two friends on opposite sides of a million-dollar roll of the dice.
Kirk put down his orange chip on the Don’t Pass bar.
If the red-hot shooter continued to score, most of the betting crowd around the table would be delighted winners. And Kirk at least theoretically would be the delighted loser. If she rolled a seven and crapped out, he would be the unintentional winner.
Kirk’s pleasant expression was inscrutable. He gazed impassively at the table. He made no eye contact with anyone.
The shooter rattled the dice in her fist and to whoops of enthusiasm from the crowd hurled them out across the table. The ivory squares bounced off the green felt and slammed into the honeycombed bumper strip lining the table’s low walls and caromed back. When the last die stopped spinning, the verdict was in.
Seven! Craps!
The House owed Kirk $1 million. Sometimes he found it hard to lose even when he tried.
Kirk and Jean were divorced later that summer, ending their marriage after nearly twenty-nine years. Children Tracy (twenty-four) and Linda (eighteen) were young adults. He set up a trust fund for Jean who almost immediately remarried. The Los Angeles Superior Court sealed the record, concealing from public view the terms of their trust agreement. She continued to reside in the posh neighborhoods surrounding Beverly Hills.
For Kirk, now in his midsixties and worth hundreds of millions of dollars, his playboy instincts seemed decidedly tame. He continued to see Yvette Mimieux into the mid-1980s, making the gossip columns simply by dining at Chasen’s or Morton’s or Ma Maison. They became neighbors in the Hollywood Hills where she grew trees. She shared some of her personally nurtured fruiting Persian mulberry saplings with Kirk.2
Their relationship cooled when he was unwilling to marry again. Yvette later married Howard Ruby, founder of Oakwood corporate housing, and an internationally noted photographer and conservationist. Yvette and her new husband remained good friends with Kirk.
In the early 1980s Kirk had hired a valet and fitness guru who served, as well, as his personal chef and traveling bodyguard, alternating as a steward on his yacht and flight attendant on his private jet. Ron Falahi, about forty, had earlier worked on the flight crew of the Fabergé corporate jet where he befriended Cary Grant.
Ron’s first assignment aboard the Kerkorian jet was flying Dean Martin and other friends of Frank Sinatra to Washington, D.C., for the inauguration of President Ronald Reagan. Sinatra was handling the entertainment. Kirk hired Ron based on one question: “So, you know Cary Grant?” And although he started exclusively as a flight attendant, Ron’s portfolio of responsibilities quickly expanded.3
Kirk had always been health-conscious and disciplined about regular exercise. He jogged daily and played tennis religiously. He ate small portions, drank in moderation, and despite bouts of insomnia tried to keep an early-to-bed and early-to-rise schedule.
Falahi was personable and energetic, a would-be actor who held jobs as a waiter, bartender, and vacuum cleaner salesman. The immigrant from Tehran was also a bodybuilder. He guided Kirk into a weight-lifting regimen that focused on improving upper-body strength. The keys to those workouts were two solid iron hand weights welded to Falahi’s specifications at seventeen and a half pounds each. Kirk used them in workouts at home but then started taking them on the road when he traveled as well.
Kirk’s “go bags”—travel luggage he wanted in addition to his wardrobe and personal items—contained several unusual things: his two weights and a Farberware electric coffee percolator with a full can of ground Folgers coffee. As Ron discovered early in his employ, Kirk expected precision in his morning brew—just the right temperature, not too strong, not too weak, always Folgers.
As Kirk’s valet, Falahi also kept track of the time. Despite Kirk’s near-phobic insistence on punctuality, he had stopped wearing his gold Rolex years earlier. He abhorred ostentatious displays of wealth—starting with jewelry. He wore no bracelets, no gold chains, no pinkie rings. He kept a simple Timex watch without a band in his pants pocket—or he asked Ron or others for the time.
Kirk drove his own cars, retained no staff chauffeurs, and kept basic American models in his garage—a Ford Taurus and a Jeep Cherokee were typical. He would routinely walk to lunch appointments around Beverly Hills, arriving with neither an entourage nor a bodyguard.
And although he was the controlling stockholder of MGM with ready access to private screenings of the latest films, Kirk preferred to get behind the wheel of his Taurus and take a friend out to one of the movie houses in neighboring Westwood Village. He loved his personal anonymity, the freedom to be able to wait in line and not be recognized—that, and the freedom to make a million-dollar bet on one roll of the dice.
29
Ted Turner’s Ticking Time Bomb
Summer 1985
Atlanta, Georgia
Ted Turner was contemplating something he consistently tried to avoid. Lawyers. But his bid to take control of the $5 billion media giant CBS was looking especially hopeless after management ordered up a round of poison pills to run him off. Sometimes litigation was the only option. But then his phone rang with an unexpected alternative.
Kirk Kerkorian was on the line. Did Ted have time to talk? Kirk was thinking of reducing his role in moviemaking. Would Ted be interested in buying MGM studios? Kirk might consider splitting off and keeping the United Artists portion of MGM/UA. He had teamed up with Drexel Burnham Lambert bond genius Michael Milken to test the market, open MGM to the highest bidder. But here was the deal . . . If Ted acted now he could have a free shot—that is, he could bid without competition if he moved quickly and made a strong offer.1
For Turner, the MGM studio and its vast film library represented almost instant and total dominance of the nation’s fledgling cable television industry. It represented escape from the potential stranglehold of content producers—TV networks and movie studios—that could freeze out cable operators and deny them access to affordable shows.
MGM/UA’s cartoon library alone, with Tom and Jerry and Looney Tunes stars Bugs Bunny and Porky Pig and the TV seasonal regular the Grinch, was sufficient to support a twenty-four-hour cartoon network. Acquiring MGM came with much more than back-lot real estate. It was buying the Land of Oz, Tara, and The Good Earth. For Turner, it was more like buying the stars and the moon.
Kirk suggested that he wanted something around $1.5 billion, but at whatever price it had to be all cash, no contingencies, a “no outs” commitment, and the deal had to be closed in two weeks. Start the clock.
Moving fast in pursuit of a big prize appealed to Turner’s sense of adventure. The yachtsman who seized the winds to win the America’s Cup race a few years earlier was a self-proclaimed “bulldog” for a challenge. At the same time, prospects of owning Gone With the Wind appealed mightily to his southern pride. But he didn’t have a billion dollars’ worth of anything, including credit. Nonetheless, after months of trench warfare fighting with CBS, the chance to work a deal with someone like Kerkorian—who actually wanted to make a deal—was exhilarating, maybe even dangerously seductive.
If Turner worried about the danger of taking on too much risk in pursuit of his dream, he must have given it only the briefest of passing thoughts. His gambling nature already had him imagining a life-
altering score. Besides, he might have asked himself, what good was a big dream if, when the winds were right, he was too timid to chase it? In fact, Ted didn’t bother to hide his enthusiasm.
Back in Beverly Hills, Kirk hung up the phone and sat back, savoring Turner’s eager response. He knew at that instant Ted was already making flight arrangements for LAX. It was obvious that Ted would try to make a deal. Kirk was less confident that the kid from Atlanta could swing it.
The phone call to Turner had been part of a series of major moves Kirk had initiated in recent months putting the MGM studio back in play on Wall Street. After nearly two decades of uneven management and disappointing financial results at MGM/UA, he wanted to take advantage of what he considered its substantial hidden value—its combined film archives. The combined company controlled about 35 percent of all movies ever made, twice to three times as many as any other single studio.
Kirk’s price was the catching point. The business side of Hollywood figured Kirk would never find a big enough sucker willing and able to pay at such “cosmic levels,” as former MGM exec Peter Bart called Kirk’s price tag. But no one had ever really tested the market value of movie archives . . . until now.
When their two-week speed-negotiations began, MGM stock was selling for about $9 a share. Kirk’s price amounted to about $28 a share—slightly less than $1.5 billion. Like a new homeowner with an astronomical mortgage, Ted was buying the studio with debt that seemed to exceed his ability to pay even the interest alone.
Kerkorian agreed to buy back United Artists for $480 million, which reduced the necessary borrowing to $1 billion, but in taking on MGM’s existing debts Ted was on the hook for another $700 million. Factoring in Turner Broadcasting borrowings was going to put Ted in the red for a whopping $2 billion.
No one, including Ted Turner, knew where he was going to come up with the financing for MGM. A combined Turner-MGM company didn’t have the earnings between them to cover interest payments on that size debt. He turned to Michael Milken at Drexel Burnham Lambert, who was already handling Kirk’s side of the transaction.
In a highly unusual arrangement—and with Kirk’s expressed consent—Milken agreed to help arrange Turner’s financing.2 Drexel investment bankers were assigned to both sides. Arthur Bilger would directly represent Turner’s interests; Ken Moelis would work independently with Kerkorian’s team. Both reported to Milken, which both Kirk and Ted approved. Drexel issued one of its “highly confident” letters signaling that the investment bank was certain it could raise the funds to finance Turner’s purchase.
And then the drama began.
Turner had signed the six-hundred-page agreement in time to meet Kirk’s two-week deadline to keep the bid private. But it was after the commitment was made that Ted asked to send a team of forty lawyers and accountants to conduct a belated due diligence review of the MGM books and audited reports. They discovered, for one thing, that the soon-to-be-released slate of MGM movies looked like a lineup of future flops. They were.
Instead of monthly earnings, MGM started out the Ted Turner era delivering losses at the box office averaging $15 million a month. The new owner was looking at another $100 million in debt from pending first-year operating losses. Turner aides, already skeptical that the massive debt could be managed, groused privately that Kirk had led them into a very bad deal. From Hollywood to Wall Street the sniping was a more public tsk-tsking that Turner had overpaid. “That price he’s paying is absurd!” an investment analyst told the Los Angeles Times.3
A month after Turner signed the deal for MGM, Drexel conceded that it was having difficulties finding buyers for its high-yield bonds. Outwardly, Turner kept a positive face. He joked about Milken’s persistent aides—Bilger and Moelis—comparing the two average-sized men to a hard-playing, sub-six-footer on his Atlanta Hawks professional basketball team. “You guys are the Spud Webbs of investment banking,” he raved.4 Privately, Turner was taking matters into his own hands, shopping for possible partners in the MGM buy, talking to NBC and Viacom and Allen Neuharth of Gannett/USA Today.
Five months after committing to buy MGM, Turner was still unable to come up with the cash to close the deal. Drexel Burnham Lambert was still unable to sell its promised allotment of high-risk, high-yield bonds—investment instruments more commonly referred to as junk bonds.
At Milken’s urging, and after an all-night negotiating session, Kirk eased up on his “no out” rule and agreed to restructure Ted’s original deal. To reduce its up-front cash requirement, Turner Broadcasting System would issue preferred stock to Kerkorian. The effect was to convert $200 million of the purchase price into debt. Kirk was effectively helping to finance his own sale.5
With renewed vigor and a closing deadline now extended to the end of 1985, Milken’s team plunged back into marketing those junk bonds. But continuing MGM losses at the box office were taking a toll on investor confidence. Ted complained that Paramount Studios was hogging all the success: “They have Top Gun, and we have ‘Bottom Gun!’”
The end of the year arrived with still no closing in sight. Investors weren’t cooperating. Drexel had failed for a second time. Ted was half-in and half-out of MGM. Shortly before Christmas 1985, Turner flew to California to meet with Kirk and to barter for more time.
Kirk Kerkorian liked everyone to understand that when a deal was made and sealed with a handshake, the negotiating was over. No do-overs. No altering the conditions. No renegotiating. Some who had been across the table from him over the years might quibble about a notable exception here or there.
Stanley Mallin, for one, complained that after Kirk agreed to a financing deal for Circus Circus, he kept coming back and adding conditions. “We had to hire his brother. Then we had to buy his party boat. It didn’t end until we paid off his loan—and then Fred Benninger wanted to charge us extra for paying it off early.”6
But never in decades of closing tough deals had Kirk ever been asked to restructure a formal agreement so substantially, and so often, as in the case of the Ted Turner deal.7 Terms of their second revised agreement were announced in a terse written statement issued in January 1986.
Kirk would lower the cash price to $20 a share, making the total value closer to $1.25 billion, reducing Ted’s up-front cash by more than $300 million. And Kirk’s buyback of United Artists, already anticipated after the sale, would now be made at closing for about $470 million. In exchange for his concessions, Kirk would receive preferred stock in Turner Broadcasting System. That stock came with a hefty 14 percent dividend payable to Kirk in cash or common stock beginning in the second year.
The new terms kept the deal alive. But for Turner it was like agreeing to pocket a ticking time bomb. He would have to pay those dividends when due or start turning over pieces of his company to Kirk. The Los Angeles Times headline summed up Ted’s dilemma: “MGM Deal Could Cost Turner His Own Firm.”8
The MGM sale finally closed in late March 1986, eight months and two failed bond sales after the initial agreement. In the end, it was Kirk’s unprecedented flexibility and willingness to help finance the sale himself that saved the deal for Turner. “He couldn’t have been fairer on the deal,” Milken said later. “I always saw him making sure the other guy got a fair deal.”9 And Kirk’s patience had the added benefit to Drexel of sparing Milken and his team from a very public pratfall.10
On the downside, however, Turner had loaded himself up with massive debt estimated at $1.9 billion. “I owe more money than anyone else in the world,” he said. It almost sounded like a boast. For now, Ted was on top of the world. Thanks to Kirk, he was a mogul with his own movie studio. He had the country’s biggest archive of classic movies. He owned Gone With the Wind. What more could a southern kid wish for.
But that time bomb in his pocket was still ticking.
30
A Burial at Sea
Early 1987
Denver
When their phone rang, Leslie Malone thought it was the middle of the night. It wa
s still dark. She fumbled for the receiver. When she heard the Georgia drawl on the other end of the line, she immediately passed the phone to her husband.
“It’s that asshole friend of yours,” she said with sarcasm fit for 5:30 in the morning Rocky Mountain time.
“Hello?”
“John! You’ve got to do something!” blurted an agitated Ted Turner calling from Atlanta. “You’ve got to do something!”
“What? What have I got to do, Ted?”
“Something!” repeated Turner. “Or else C-N-N will become K-N-N!”
“K-N-N? What the hell is K-N-N?”
Ted bellowed into the phone, “Kerkorian News Network!”1
Ted Turner was in trouble and his desperation was showing. Nearly a year after closing the billion-dollar-plus deal with Kerkorian for MGM, he was still suffering from debt hangover. In a few weeks his first dividend interest payment to Kirk would be due. He didn’t have it. He might have to start dismantling Turner Broadcasting System to meet his obligations.
On this particularly anxious winter morning Turner was calling one of his most important rivals in the emerging cable TV industry, John C. Malone, the CEO of Tele-Communications Inc. Malone was also among those most concerned about Ted’s financial welfare. It was clear throughout the cable world that TBS had come out of the MGM deal dangerously vulnerable. No one in the business wanted a strong, independent operator like Turner to fail.
The Gambler Page 23